Falling From Grace, Often to the A-List

FOR anyone in the private sector, the rise and very public fall of Harvey L. Pitt as chairman of the Securities and Exchange Commission would appear to be a career-stopping performance. Mr. Pitt had earned a stellar reputation in Washington as a securities lawyer with ample blue-chip corporate ties. Then, after a stormy 15 months laden with missteps, he made an election-night resignation that appeared as if he wanted to sneak out of town while no one was looking.

Who would hire someone who failed so publicly, who was excoriated by the same business publications that once sang his praises?

But if history is any indication, the outlook for Mr. Pitt may not be so bleak. Many in business -- as well as old Washington hands -- who have had their names tarnished and reputations sullied have discovered that there is life in the private sector after public disgrace, and a potentially profitable one at that.

Members of Congress who have resigned or who have been forced out are making money as lobbyists for Fortune 500 companies. Wall Street executives who went to the White House and were caught up in the Clinton scandal machine have bounced back, more successful and richer than ever. Cabinet secretaries and other politicians whose lurid sexcapades were grist for the tabloids are active in major corporations. Even nannygate dust-ups that scuttled cabinet appointments in both the Clinton administration and the first Bush administration are now distant memories for the businesswomen involved.

Just last Thursday night, at a glittery black-tie dinner in New York sponsored by the Aspen Institute, a study group, talk turned to Mr. Pitt. During predinner cocktails, one prominent New York lawyer said Mr. Pitt had a promising future, made even stronger by his S.E.C. tenure and the insights he picked up there.

''Harvey Pitt is going to be the hottest ticket coming out of Washington,'' said the lawyer, Robert A. Profusek, a partner at Jones, Day, Reavis & Pogue, sipping from his drink. ''I know his phone is ringing off the hook with law firms trying to hire him. He's an excellent lawyer, and a lot of people think he is a victim. People don't look at him here the way they do in Washington. I also think, from his point of view, he's going to want to prove that he is not damaged goods.''

Others may disagree. In fact, there is no clear picture of life after a public tumble; the future is often determined by what caused the fall, like simple poor performance and a political tin ear, as in the case of Mr. Pitt, or more serious mistakes, as in the cases of disgraced politicians and executives who faced criminal charges. A person's network of contacts is also a factor, not to mention sheer likability.

Even professional headhunters have a hard time divining that line.

''Life diminishes when you go to Washington and you stumble,'' said E. Pendleton James, a senior adviser at Whitehead Mann, an executive recruitment firm, and a former head of personnel in the Reagan White House. ''There is a diminution in the value of your acumen to corporate America. But, having said that, it depends on how one falls or fails.''

In dozens and dozens of cases, Americans have been a forgiving lot. The half-life of a scandal can be short, redemption can be swift and the main lingering effect of a public downfall is often the celebrity it brings.

''Washington has a long and honored history of forgiving and forgetting when it comes to getting knocked around in public positions,'' said Kenneth A. Gross, a partner in the Washington office of Skadden Arps Meagher Slate & Flom, who has represented many prominent politicians. ''Short of being actually convicted, after a period of time in which there is some delicacy on the issue, all that people remember is that you are famous. Then they want you at all the A-list cocktail parties.''

That may shock some people, who believe that malfeasance or mistakes in public service should not be overlooked so easily, let alone rewarded. They bemoan the cavalier way in which people are often welcomed back with open arms and minimal consequences.

Of course, Mr. Pitt, or anyone else in his position, is unlikely to receive an invitation to rejoin an administration. Washington is too much the fishbowl for that.

''The vetting process for top government jobs is getting extremely complicated,'' said James J. Albertine, president of the American League of Lobbyists. ''You are talking about basically standing naked in front of the world and having every blemish you ever dealt with shown to the world. And that increases the higher the job is. It's becoming a real issue because no one is perfect and even if they are a perfect person, they often get killed by the scrutiny anyway.''

But the private sector often shrugs off Washington's scandals and bungling.

The Clinton scandals caught two prominent Wall Streeters, who incurred only minor bruises. One was Roger C. Altman, who was forced to resign as deputy Treasury secretary in 1994 amid a cloud of criticism over his inaccurate testimony in Congressional hearings about the Whitewater scandal. After leaving Washington, Mr. Altman founded Evercore Partners, a boutique investment bank that had no trouble lining up clients like CBS, Dow Jones, NBC and AOL Time Warner. And though Mr. Altman cited the news media as a cause of his problems, Evercore later bought American Media Inc., publisher of The National Enquirer, the splashy tabloid.

Mr. Altman declined to be interviewed.

The other big Wall Streeter was Bernard W. Nussbaum, a veteran corporate lawyer, who resigned as the Clinton White House counsel after questions were raised about his role in Whitewater. He was later cleared of any wrongdoing.

''Life hereafter is fine,'' said Mr. Nussbaum, who returned to his desk as a partner at Wachtell Lipton Rosen & Katz. By the accounts of many who know Mr. Nussbaum, his business has only grown since leaving Washington. Mr. Nussbaum, too, agrees that memories are short when it comes to Washington headlines.

''People get driven out over public relations things,'' he said. ''Things are twisted to make them seem egregious when it is really nothing. That is why other areas around the country are not like Washington. People in New York, Los Angeles and San Francisco are sophisticated'' and quickly forget, he added.

OBVIOUSLY, executives flame out within the corporate world, as well, sometimes almost as publicly. The last year has produced a bumper crop of chief executives who have been charged with running afoul of the law. And hardly anyone expects the likes of Samuel D. Waksal, the former chief executive of ImClone Systems, L. Dennis Kozlowski, the former chief of Tyco International, or Andrew S. Fastow, the former chief financial officer of Enron -- all indicted -- to find jobs in public companies anytime soon, if ever.

Albert J. Dunlap, the former chief of Sunbeam who was despised by many and nicknamed Chainsaw Al for his slash-and-burn treatment of employees, is probably equally unemployable.

Still, corporate America has often been forgiving of its own. Several executives who have left in disgrace, even after civil charges, have been rehabilitated. After a time in purgatory, when they set themselves up as consultants or investors, people like John H. Gutfreund, the former chairman of Salomon Brothers who was forced out after failing to inform the authorities about illegal bidding at the firm, and Lawrence Kudlow, who had worked as chief economist at Bear, Stearns and in economic posts in Washington before his troubles with illegal drugs were revealed, have rebounded. Mr. Gutfreund now works as senior managing partner at C. E. Unterberg, Towbin, while Mr. Kudlow is co-host of ''Kudlow & Cramer'' on CNBC.

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Though incompetence or disagreement with management have also caused the public fall of many top executives, oddly their fate is less predictable. Jacques A. Nasser, forced out of the top post at Ford Motor in October 2001, by the Ford family, has yet to land a new job. Nor has Jill E. Barad, who was drummed out of Mattel's top job, nor Robert W. Pittman of AOL Time Warner.

In fact, some of these executives may be treated more harshly by their brethen than those who have tripped up in the capital. ''There is more understanding for someone who has stumbled in Washington than for someone who has taken a company and driven it downhill,'' said Gerard R. Roche, senior chairman at Heidrick & Struggles, an executive search firm.

UNLIKE Mr. Pitt and other public servants, most of these ousted executives can find comfort in their overstuffed golden handshakes, which can run into the tens of millions; they don't need to work. But Washington awards a trump card -- lasting access to power. Many corporations are willing to overlook an ethical lapse or a subpar performance and put those with Washington expertise on their boards, to use them as lobbyists or to make them partners in business deals.

Consider Robert L. Livingston, a Louisiana Republican who was on the verge of becoming the House speaker but who resigned from Congress in 1998 after confessing to adultery. Today, he is one of Washington's most sought-after lobbyists, heading the Livingston Group, which took in $3 million in 2000, the most recent data available, with a client roster that has included General Electric, Lockheed Martin, Raytheon, Oracle and 44 others.

''I was almost speaker of the House and I could have been if I had chosen to stay,'' Mr. Livingston said. ''I was in demand then, and I've been in demand ever since I've left.''

The same is true for Bob Packwood, a Republican from Oregon who resigned in disgrace in 1995 after an ethics committee unanimously found he had forced himself on nearly two dozen women in his office, including a 17-year old intern. Mr. Packwood reported lobbying income of $1.4 million in 2000 and his client list includes Northwest Airlines, United Airlines and Verizon Communications.

''It takes a while,'' Mr. Packwood said. Reflecting on the process, he added: ''In the real world, they're not going to touch you if you go about moaning and complaining. But if you just go about your life, the real world is pretty forgiving.''

So forgiving, in fact, that former Representative Dan Rostenkowski, a Chicago Democrat who served time in prison for misuse of public funds (he was later pardoned by President Clinton), was even appointed to a corporate board. His opinions on tax issues -- drawn from his long tenure as chairman of the House Ways and Means Committee -- appear on the op-ed pages of major newspapers, including The Wall Street Journal.

Last year, when Mr. Rostenkowski was named to the board of American Ecology, a radioactive- and hazardous waste services company, where he served until last April. In announcing Mr. Rostenkowski's selection, the company made it clear that it was looking to capitalize on his connections in the capital.

''We look forward to Mr. Rostenkowski's contributions based on his 36 years of outstanding Congressional service,'' said Jack K. Lemley, the company's chief executive at the time. ''His knowledge and expertise is particularly valuable to American Ecology's efforts to further penetrate the expanding federal government services market.''

Henry G. Cisneros, a former Clinton cabinet secretary, pleaded guilty in 1999 to lying to the Federal Bureau of Investigation about payments to a former mistress, but he has decidedly recovered from charges that could have resulted in a 90-year prison term.

First, Mr. Cisneros became president and chief operating officer at Univision, the nation's largest Spanish-language television broadcaster. In August, he formed a partnership with the Kaufman & Broad Home Corporation, one of the largest homebuilders in the United States, to develop low-cost housing in San Antonio.

Many other examples date from earlier years.

Tony Coelho, who resigned from Congress in 1989 over a controversial junk-bond investment, has made millions as a businessman and even returned to politics when Al Gore hired him to be his campaign chairman before the 2000 election. After resurrecting himself with a brief stint on Wall Street, Mr. Coelho has held positions on 11 corporate boards, the most prominent being Kistler Aerospace.

Michael K. Deaver, who was chief of staff in the Reagan White House, is now one of Washington's most powerful public relations executives; he heads the Washington office of Edelman Public Relations. His conviction on felony perjury charges in 1987 for lying to Congress and to a federal grand jury, and a suspended prison sentence, matter not at all.

Michael P. Castine, who also worked in the Reagan inner circle and is now a managing partner in TMP Worldwide, an executive recruiting firm, recalls the day he brought an old friend -- one caught up in a Washington scandal -- to the Senate dining room. ''Six or seven senators of both parties came up to him,'' Mr. Castine recalled. ''Rather than avoiding him, they embraced him.'' The man simply had too much influence and too many connections to ignore.

Of course, someone who is tainted, yet has successfully regained footing as a lobbyist or by starting a business, hasn't necessarily gained full redemption. Cracking A-list corporate boards is a taller order, and is likely to be even more so now that the spate of corporate scandals has made all boards more sensitive to public opinion.

''With the enormous scrutiny taking place, corporations only want people who are squeaky clean on their board,'' said Mr. Roche, the executive recruiter. ''It used to be that boards could wink at some of these folks. Not any more. And if you want to put someone on the audit committee, they've got to be up for sainthood. We do work for the AT&T's and the Alcoas of the world. They are not looking for the Bob Packwoods.''

Some people applaud the trend. Charles Lewis, executive director of the Center for Public Integrity, bemoans America's forgetfulness about transgressions by public officials. ''They have a public trust, and if they violate it, they should be on the hook,'' he said. ''It's a privilege and a magnificent opportunity to serve the public in these important positions. If they can't cut the mustard, then goodbye.''

Editors' Note: November 14, 2002, Thursday An article in Money & Business on Sunday described the careers of officials and executives after they were fired or forced to resign. It said the corporate world was sometimes less forgiving than the political one. The article cited, as examples of those who had yet to land jobs, Jacques A. Nasser, former chief executive of Ford; Jill E. Barad, former chief of Mattel; and Robert W. Pittman, former chief executive of America Online. Although the article also said that many such executives do not need jobs, the three should have been invited to comment. On Monday Mr. Nasser said he was joining Bank One's leveraged buyout arm. Mr. Pittman said through a spokeswoman for AOL Time Warner that he was not seeking a job at this time. Although messages were left with Mattel and other organizations with which Ms. Barad is or has been associated, she did not return telephone calls this week.